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Oil Prices Rise as Saudis and Russians Reconfirm Supply Reductions

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Oil Prices Rise as Saudi Arabia and Russia Reaffirm Supply Cuts

Oil prices in Asia edged higher after Saudi Arabia and Russia confirmed their commitment to maintain oil supply curbs of over 1 million barrels per day until the end of the year. Global benchmark Brent crude traded above $85 a barrel, while West Texas Intermediate remained near $81. This announcement from the OPEC+ heavyweights follows a decline in oil prices of more than 6% last week due to the diminishing Israel-Hamas war premium and concerns about weaker global demand.

Factors Driving Oil Prices

The recent surge in crude oil prices was triggered by the Hamas attack on Israel, but those gains have been largely reversed as the conflict remained contained and did not disrupt oil supplies from the Middle East. The main drivers of oil prices now are the weakening global economic outlook, highlighted by a contraction in Chinese manufacturing, and growing US stockpiles. Despite the falling dollar making oil cheaper for most buyers, it has not been sufficient to halt the downward slide of prices.

Recalibration and Supply Certainty

Experts predict a slow and uncertain recalibration for crude oil as it sheds the risk premium associated with the Israel-Hamas conflict and aligns with economic sentiment. However, one relative certainty is the supply side, with OPEC+ maintaining steady output targets until the end of the year. This commitment provides some stability to oil markets amidst the broader economic uncertainties. In conclusion, the reaffirmation of supply cuts by Saudi Arabia and Russia has contributed to a rise in oil prices. While economic factors and geopolitical tensions continue to influence the market, the commitment to supply reductions offers a degree of certainty for oil prices in the near term.

Impact of Rising Oil Prices on New Businesses

Cost Implications

The recent rise in oil prices, driven by Saudi Arabia and Russia's reaffirmed commitment to supply cuts, could have significant implications for new businesses. For companies in sectors such as manufacturing, transportation, and energy, higher oil prices could lead to increased operational costs. These businesses may need to reassess their budgets and pricing strategies to maintain profitability.

Market Uncertainty

The current volatility in oil prices, influenced by geopolitical tensions and a weakening global economic outlook, adds an element of uncertainty for new businesses. Companies must stay abreast of these market fluctuations to make informed decisions about their operations and investments.

Supply Chain Considerations

The commitment by OPEC+ to maintain steady output targets until year-end provides some stability for businesses reliant on oil supplies. However, companies must also consider potential disruptions to their supply chains due to geopolitical conflicts or economic downturns.
In conclusion, the rising oil prices present both challenges and opportunities for new businesses. While increased costs and market uncertainty may pose difficulties, the commitment to supply reductions also offers some predictability in a volatile market. New businesses must navigate these complexities to ensure their sustainability and growth.
Story First Published at: https://financialpost.com/pmn/business-pmn/oil-edges-higher-after-saudis-and-russians-reaffirm-supply-cuts
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